108 the concept of materiality a involves only tangible assets and not intangible as 4355626

 

 

108.The concept of materiality: 
 
 

A. Involves only tangible assets and not intangible assets.

 

B. Relates only to the income statement and not the balance sheet.

 

C. Is always an exact percentage of a financial account balance.

 

D. Is measured as an item significant enough to influence the decisions of users of financial statements.

 

 

 

 

109.Which of the following statements concerning materiality is true? 
 
 

A. Generally accepted accounting principles are violated if estimates are used in end-of-period adjustments.

 

B. Each year the Financial Accounting Standards Board (FASB) publishes the dollar amount considered “material” for each industry.

 

C. Immaterial items should be handled in the most expedient manner, even if resulting financial statements are not completely precise.

 

D. Accountants should not waste time and money in recording transactions involving small dollar amounts.

 

 

 

 

110.The concept of materiality: 
 
 

A. Treats as material only those items that are greater than 2% or 3% of net income.

 

B. Justifies ignoring the matching principle or the realization principle in certain circumstances.

 

C. Affects only items reported in the income statement.

 

D. Results in financial statements that are less useful to decision makers because many details have been omitted.

 

 

 

 

111.Which of the following would not be a proper application of the concept of materiality by Millridge Corporation? 
 
 

A. Transactions involving small dollar amounts are not recorded in Millridge's accounting records.

 

B. Estimates of supplies on hand are used to determine the supplies expense for the period.

 

C. On a monthly basis, utility bills are expensed in the month paid, rather than in the month in which services are used.

 

D. Immaterial items are ignored in making end-of-period adjusting entries.

 

 

 

 

112.Which statement is true about an adjusted trial balance? 
 
 

A. It is prepared before adjusting entries.

 

B. Revenue accounts and expense accounts should not appear on the adjusted trial balance.

 

C. Balance sheet items are presented before income statement items.

 

D. Accumulated depreciation should equal depreciation expense.

 

 

 

 

113.On the adjusted trial balance, retained earnings is: 
 
 

A. Stated at the period-end amount.

 

B. Stated at the period-beginning amount.

 

C. Adjusted for all revenues and expenses for the period.

 

D. Adjusted for the period's dividends.

 

 

 

 

114.Before any month-end adjustments are made, the net income of Bennett Company is $76,000. The following adjustments are necessary: office supplies used, $3,160; services performed for clients but not yet recorded or collected, $3,640; interest accrued on note payable to bank, $3,040. After adjusting entries are made for the items listed above, Bennett Company's netincomewillbe
 
 

A. $66,160.

 

B. $78,560.

 

C. $73,440.

 

D. $76,000.

 

 

 

115.The accountant for Perfect Painting forgot the following two adjustments at the end of 2015:

(a) The entry to record depreciation: $3,000.
(b) The entry to record the portion of fees received in advance which have now been earned: $3,000.

As a result of these two omissions: 
 
 

A. Net income for Perfect Painting for 2015 is overstated.

 

B. Net income for Perfect Painting for 2015 is understated.

 

C. Assets of Perfect Painting are overstated at December 31, 2015.

 

D. Liabilities of Perfect Painting are understated at December 31, 2015.

 

 

 

 

116.Before making month-end adjustments, net income of Cardinal Company was $116,000 for March. Adjusting entries are necessary for the following items:

-Depreciation for the month of March: $2,300.
-Rental income accrued during March, tenant to pay in April: $800.
-Supplies used in March: $100.
-Fees earned in March that had been collected in advance: $2,600.

After recording these adjustments, net income for March is: 
 
 

A. $112,400.

 

B. $113,620.

 

C. $117,000.

 

D. $110,800.

 

 

 

117.Before any month-end adjustments are made, the net income of Russell Company is $38,000. However, the following adjustments are necessary: office supplies used, $3,160; services performed for clients but not yet recorded or collected, $3,040; interest accrued on a note payable to bank, $3,640. After adjusting entries are made for the items listed above, Russell Company's netincomewouldbe: 
 
 

A. $38,000.

 

B. $34,240.

 

C. $41,160.

 

D. $44,200.

 

118.Before making month-end adjustments, net income of Bobwhite Company was $232,000 for March. Adjusting entries are necessary for the following items:

-Depreciation for the month of March: $4,300.
-Rental income accrued during March, tenant to pay in April: $900.
-Supplies used in March: $300.
-Fees earned in March that had been collected in advance: $3,600.

After recording these adjustments, net income for March is: 
 
 

A. $222,900.

 

B. $227,700.

 

C. $231,900.

 

D. $235,600.

 

 

 

 

 

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